Vodafone will be forced to front 25 billion rupees (€405 million) of the disputed funds in its court battle with India's tax authorities, even while it continues to fight the claim.
India's Supreme Court yesterday ordered Vodafone to pay the deposit and make bank guarantees for the remainder of the 112.18 billion rupee tax claim within the next eight weeks, FT.com said.
The trial itself has been adjourned until February 24 next year. Vodafone will be returned the deposit in full, with interest, if it wins the case.
Vodafone is appealing a tax claim relating to its 2007 acquisition of Hutchison's 67% stake in what is now Vodafone Essar.
The carrier maintains that the transaction should not be taxable because it was conducted overseas through a Dutch subsidiary, which bought the stake indirectly from a Hutchison-run firm in the Cayman Islands.
The Dutch government has separately intervened in the case on behalf of that subsidiary, FT reported. It is seeking an out of court settlement based on the country’s double tax avoidance agreements.
Financial analysts told CNBC-TV18 that Vodafone had not set aside a provision for the charge. But they said that while the deposit will impact Vodafone's balance sheet, it is unlikely to have an effect on bottom-line profit.
Vodafone's CEO, Vittorio Colao, last month made clear that the company's future expansion plans in India would hinge on a positive result in the tax battle.
Vodafone's Nasdaq stock fell 13 cents yesterday, then a further 15 cents in after-hours trading to $27.72. Its London shares are largely unchanged.